Homework 2 Solutions - Homework 2 Solutions Chapter 3 2(a(b...

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Homework 2 Solutions Chapter 3 2. (a) (b) It depends on whether demand responds to the lower price and by how much. The diagram in (a) suggests that if price was lowered a substantial amount, the stadium would be filled. If demand is “elastic” enough, the quantity demanded will increase by more than the fall in ticket price and revenues will rise. If demand is not responsive enough, the quantity demanded may not increase enough to offset the fall in ticket prices and revenues will fall. The easiest example of the latter would occur if demand were “perfectly inelastic,” which implies that no one else would come to the game despite the lower price. (c) The price system was not allowed to work to ration the New York tickets. Some other rationing device must have been used. Perhaps people stood in line or queued. Perhaps there was a lottery. In all likelihood, there would be a secondary market for the tickets (scalpers). You could no doubt find the tickets for sale online at a high price.
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